If you think the market has been good to investors lately, they've got nothing on bullish speculators. Many of the forgotten stocks that are trading for mere pocket change on a per-share basis have been roaring back lately.
Will it last? Are the gains sustainable? Can it all be gone just as quickly? Volatility cuts both ways, of course.
Let's take a look at a few of the risky low-priced stocks that have more than doubled recently.
|
Low |
Date |
March 26 |
Gain | |
|---|---|---|---|---|
|
Sirius XM Radio (NASDAQ:SIRI) |
$0.05 |
Feb. 11 |
$0.39 |
680% |
|
Six Flags (NYSE:SIX) |
$0.14 |
March 17 |
$0.31 |
121% |
|
Rite Aid (NYSE:RAD) |
$0.20 |
March 6 |
$0.43 |
115% |
|
Blockbuster (NYSE:BBI) |
$0.13 |
March 3 |
$0.83 |
538% |
The gains are substantial, but now isn't the time to get cocky. As far as these four stocks have come, they are all trading well below their best prices ever.
There are a few common threads, but perhaps the most sobering similarity in most of these bouncers is that Sirius XM, Six Flags, and Blockbuster bottomed out around the time that they had either warned investors that filing for bankruptcy protection could be an option or had hired a firm to assess the possibilities of reworking their debt loads.
It's important to note that the companies aren't out of the woods just yet, heady stock gains notwithstanding. Sirius XM found a sugar daddy in Liberty Media (NASDAQ:LINTA), but it simply pushed most of its 2009 debt obligations into 2010 and 2011 at higher rates. Blockbuster went on to post its fourth consecutive quarter of higher same-store sales in the U.S., but the company's financials could be stronger.
Six Flags has $300 million in preferred shares to repay in August, and it's scrambling to raise capital. The upside here is that 2009 may prove to be a better operating season for the chain of regional amusement parks. It kicked off Spring Break at Six Flags Over Texas with record attendance earlier this month. Rite Aid's debt-to-capital is clocking in at a grim 85%, though sales at the drugstore chain are growing.
In other words, the four stocks are still flawed enough to fail. Catalysts make investors willing to take a chance on the low-priced lottery tickets, hoping for even bigger jackpots if the companies make it through the storm.
It won't be easy, but a speculator's life rarely is.
Some other Sirius stories:
